Is The Worst Over? This Is What The Bears And Bulls Have To Say

What started the week before last got worse towards the end of last week. While Bitcoin already had its bottom at $30,000 on Coinbase and on some exchanges almost $28k, the pain continued for Ether prices.

On Sunday, while BTC went down yet again to $31,100, Ether fell to about $1,725 on Coinbase, representing a 60.6% drawdown.

Altcoins simply got obliterated during the Sunday sell-off, losing more than 90% of their value.

The new week, for now, is starting on a green note with BTC near $38k and ETH at just under $2,400. Just like altcoins went down hard, they are now up 10%-50% in the past 24 hours.  BNB +33%, ADA +34%, DOGE +13%, XRP +24%, DOT +78%, LTC +23%, LINK +44%, MATIC +80%, and SOL +33%.

Speculating on crypto is not supposed to be easy.

That is why you can make so much money on it.

— Alex Krüger (@krugermacro) May 24, 2021

It could be expected that the worst is over as the funding rates are in deep negative territory. Also, this seems to be the end of the largest liquidations as after the Black Wednesday blow-up, liquidations have been under $1.5 billion, and the open internet halved.

While amidst the low liquidity, selling pressure, and China panic continues to be a big negative for the market, miner capitulation and selling from corporates who have Bitcoin on their balance sheet could bring the bears back.

Big fact: bond & equitity markets would go through similar crashes without the permanent suport from central banks. https://t.co/q3ZS8ZcGJj

— Alex Krüger (@krugermacro) May 24, 2021

However, the market also has positive drivers in the form of increasing stablecoin supply. In the past seven days, USDT’s market cap has increased from $58.14 billion to $60.26 billion, and USDC’s rose from $16.86 billion to $20.63 billion, as per CoinGecko.

While it could be used for buying crypto, it could also be used to park in yield farms or collateral for someone trying to get super short, said Sam Trabucco, a quant trader at Alameda.

Not to mention, the supply increases if the peg goes above $1. Both USDT and USDC have seen some fluctuations, more than usual, since the mid of May.

This is for buying the dip, and why tether issuance sometimes coincides with market bottoms. This is basic common sense, and not a sign of market manipulation (as conspiracy theorists would like you to believe). https://t.co/W04IcEUlQF

— Alex Krüger (@krugermacro) May 23, 2021

Also, funds are coming with their money to scoop up cheap coins. As Jason Choi of the crypto fund, The Spartan Group noted: “Almost every retail friend I know has sold or is selling, and almost every fund I speak to is bidding, albeit slowly.”

Another fund Amber Group is reporting flows from crypto funds, macro funds, opportunistic VCs” who it says are “beginning to buy this dip in BTC+ETH as well as blue-chip DeFi by staggering limit orders and running longer TWAPs. Buying is still relatively passive/measured at this moment.”

Number of #Bitcoin accumulation addresses has surged on this sell-off. pic.twitter.com/RZBlrbs1l8

— Lex Moskovski (@mskvsk) May 22, 2021

The market is reversing from small Alts to Bitcoin, and Ether with Korean trading funds are spot buying.

“Asian family offices and UHNWIs which were sidelined are starting to fade this moving using options (selling puts) given the favorable skew / high implied vol as a way to scale in,” added Amber Group.

Someone told me some of you are bad at reading comprehension so just to be clear, haven't been net short crypto at all since 2018, inclusive of this year and this moment

Also didn't sell any ETH or DeFi on the way down and own more ETH today than ever before https://t.co/8bCGveL5Es

— Zhu Su (@zhusu) May 23, 2021

Bitcoin had its worst monthly performance in May since March 2020 and before that Dec. 2018. Bitcoin’s realized cap or “cost basis” actually decreased for 8 straight days during this recent sell-off, indicative of newer coins selling.

But this isn’t the same as the past bear markets.

“The difference between the price of BTC vs. that blended cost basis at current levels is the tightest its been since 9/8/20 and back in the ~50% range all time,” while in 2015, 2018, and 2020, it hit 0% and flip negative at various points, noted John Street Capital.

All of this has the market expecting the ongoing sell-off to be the mid-way of the bull run instead of a bear market.